6 Things Microsoft Must Do In 2013

This could be a make or break year as Microsoft looks to establish itself in mobile, cloud and other hot new markets while fending off challenges to its Windows franchise.

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The past 12 months were challenging ones for Microsoft. The company launched Windows 8, but early sales are said to be modest at best. Windows Phone 8 also arrived last year, but Redmond's share of the smartphone market remains stuck at less than 4%. Meanwhile, the company continues to push into new markets like cloud, hardware and online entertainment with mixed success.

But don't count out Redmond just yet. Microsoft remains the world's biggest software company, it's got a deep management bench, and it's cash rich. Here are some moves the company can make this year to boost its fortunes.

1. Client: Some people love Windows 8, others not so much. Microsoft needs to acknowledge the mixed feelings by giving users the option of booting into the more familiar Windows Explorer environment instead of Metro. Some third-party tools, such as Win8StartButton, have emerged that let users do just that. But Microsoft needs to step in with official support.

The company also needs to put some of its cash to work enticing developers to build more Windows 8 apps, even if at its own expense. Many big content and service providers, including Facebook and Twitter, are on the sidelines when it comes to Windows 8. Microsoft needs to court them more aggressively.

2. Hardware: 2012 saw Microsoft take its first real plunge into the PC hardware business, with the release of the Surface RT tablet and the upcoming Surface Pro. But the early word is that Surface RT sales are slow. One factor is undoubtedly price. At $499, Surface RT costs the same as the entry-level new iPad. Microsoft needs to recognize that establishing a new brand takes some sacrifices, including profits.

Surface RT would be better priced at about $399, $100 less than the new iPad, but still two hundred bucks more than Amazon's Kindle Fire HD. Even if that makes it a loss leader for Microsoft, it's well worth it if it gets the device into more users' hands.

3. Services: With software becoming a commodity and Microsoft's hardware plans still nascent, the company needs to steal a page from IBM's playbook and build out its services arm. It primarily plays in the market through its equity stake in Avanade, which is majority-owned by Accenture. But it needs to build out its own offerings to compensate for what will surely be declining Windows revenues in the coming years.

Enterprises may be supporting more and more non-Microsoft products on the front end, but they'll still need help tying it all together on the back end and integrating in-house and cloud services. It's potentially a huge opportunity that Microsoft needs to cash in on, even if means making an acquisition. Accenture itself might be a logical target.

4. Cloud: Microsoft needs to make Azure a more compelling environment for mission-critical enterprise applications and services while reducing migration hassles. To its credit, it's evolving Windows Azure from platform-as-a-service (PaaS) To infrastructure-as-a-service (IaaS). Earlier last year, it added persistent-state virtual machine support to Azure, allowing it to accommodate a wider variety of software, including Linux. Microsoft also introduced Hadoop for Azure and support for MapReduce.

In late December, Microsoft added job scheduler support for Windows Azure Mobile Services, and improved scaling for Azure website services and support for SQL Data Sync Services from within the Azure Management Portal. In 2013, it needs to further its build out of its cloud platform to keep it competitive with Amazon EC2, IBM's SmartCloud and other cloud services.

5. Big Data: When it comes to big data, IT's latest megatrend, Microsoft isn't thought of in the same breath as Oracle, with its Exadata Machine, or IBM and its Netezza line. Yet its own Bing search engine, which runs on Windows Server 2012, routinely crunches more than 100 petabytes of data to yield search results. Microsoft also recently began supporting the Apache Hadoop open source framework for distributed big data processing. And it's got powerful front-end tools like PowerPivot for Excel and SQL Server Analysis and Reporting Services.

With opportunities on the client side declining, the company needs to get more aggressive about packaging and marketing these solutions. Dedicated hardware, along the lines of IBM's Netezza Data Warehouse Appliance, would be a good step.

6. Xbox: Windows' declining cachet in the consumer market hasn't affected Microsoft's Xbox franchise. The platform is going stronger than ever, as 2012 saw the introduction of hits like Assassin's Creed 3 and Halo 4, while the Kinect hands-free motion controller has won critical acclaim.

The company needs to inject some of Xbox's life into other product lines, such as smartphones, that have yet to catch on with consumers. With Windows Phone 8 struggling to find a niche, a good place to start would be an Xbox-branded smartphone, or a smartphone based on an Xbox blockbuster franchise like Halo.

What else do you think Microsoft needs to do in 2013 to recapture its mojo? Let me know in the comments section below.

I think Microsoft should focus on its development proces to become more innovative. While the company has invested in agile methods, it still lacks a true implementation of quality and rapid innovation processes. A book entitled: Lean, Agile and Six Sigma IT Management, outlines the three methods that Microsoft needs right now. I wish all Microsoft product managers would read this book. they should fix their development process before trying to build another version of Windows OS.

MSFT won't do anything different for a few quarters. If time shows a substantial share of consumers just won't buy Windows 8 on nontouch systems, MSFT is likely to be rational enough to recognize that they need to provide the classic desktop UI as a boot option. Pushing the new UI as the only option was a mistake.

As for Windows RT, Surface RTs are overpriced. At US$500 without keyboard cover, only big Windows fans with cash to burn bought them, and now we have a rough idea how many of those people there are. Bad news for MSFT: there are more Apple fans with excessive disposable income. The Surface RT needs a lower price, but I don't believe US$400 is low enough. More like US$350 for the base model. At that price, I don't see many OEMs being interested in making them, but I don't see this as a bad thing. The Surface RT running Windows RT makes more sense as MSFT's proprietary, mostly plain tablet. It'd be able to run the same Windows Store Style apps as Windows 8 and subsequent PC versions, but that'd be the extent of the overlap.

Further, they should drop the Office RT version. Presumably Office 365 should be able to run under the Modern mode of IE10. Add functionality to make Office 365 look like a local app, similar to Google Docs in ChromeOS or Peppermint Linux, and maybe give Surface RT users a special deal on it. IOW, eliminate desktop mode from it.

Then MSFT would have a pure, proprietary tablet play, and its PC OS could also run its tablet apps in addition to behaving like a 'real PC' as most PC users would expect. Windows 8 as Windows 7 plus Windows RT rather than the current state of confusion.

Some errors in the article - 1) Big Data , Microsoft already have dedicated Big Data hardware in the form of the PDW system , and its been available for over a year. 2) Services - You forgot about Microsoft Consulting Services

win8. ribbon menus. yuk. msft is trying to mold its customers. initial acceptance of win8 doesn't look promising. win8 should have been an optional 'skin' like -- Mint -- in case you don't like Ubuntu on your 'Nix box. there are good places for a touch screen interface -- and msft should offer that . but it's likely too late . the windows o/s is probably beyond salvage . check for key names who have recently left msft ...

What is "Windows Explorer environment"? Did you mean Windows Desktop environment?As far as Surface goes, it will not be a loss at 399$. BOM plus manufacturing is about 280$, so selling at 299$ would make Microsoft break even. What Microsoft asks for it now is just ridiculously overpriced and unethical.